Patterns of Foreign Direct Investment in Southern European Periphery

Abstract

This paper examines patterns of Foreign Direct Investment (FDI) inflows to Southern European (SE) regions, which seem to be at the margin of the FDI attraction game accounting for a very small share of total inward FDI in the EU. In order to understand why these regions have attracted such a low number of foreign investors, this contribution provides the following analysis: (i) an overall picture of the main characteristics of patterns of inward FDI in SE regions at geographical and sectoral levels; (ii) the factors that drive FDI flows into EU regions; (iii) an assessment of the potential attractiveness of SE regions, both in absolute terms and with respect to other EU regions. The main results indicate that SE regions are definitively less attractive than other EU regions, though a lot of variation does exist at both geographical and sectoral levels. In order to improve their capacity to attract FDI, SE regions should improve their factors of attractiveness by implementing several structural reforms.